How to Trade on G7 Plan to Weaken the Yen (TM, SNE, HIT, EZJ, JYF)

Daniel Hayden IV, provided by

Published 4:00 am, Friday, March 18, 2011

The Japanese stock market led most Asian stock markets higher after the G7 group of industrialized nations announced that its members would intervene in the foreign exchange markets in order to bring a rising Japanese yen under control.

The Japanese yen began climbing after an earthquake and tsunami devastated Japan last week. One of the factors that pushed the yen ever higher was that because of the massive costs involved in rebuilding Japanese infrastructure, there would be an influx of cash into Japan.

The problem is that a rising yen would be serious blow to Japan's export-fueled economy because it would cause the price of Japanese exports to soar higher at a time when the country's economy is under serious strain.

Many of Japan's manufacturers have shut down operations as they assess damages and make repairs. Much of Japan's oil refining capacity was take offline by the earthquake and tsunami and the fires that followed.

Several of Japan's nuclear reactors are offline as well and it is feared that if workers aren't able to lower the temperatures at the damaged Fukushima Daiichi nuclear power plant, a meltdown may occur.

At a time when Japan's manufacturing and export capacity have been reduced by closed factories and reduced energy supply, a strong yen that would make Japanese exports more expensive could deal Japan's economy a critical blow.

The G7 nations, which include the United States, Japan, Germany, the United Kingdom, France, Italy, and Canada, will coordinate their efforts to ensure that a strong yen doesn't further burden the Japanese economy's recovery.

News of the intervention sent the Japanese stock market surging higher, with the Nikkei 225 index of Japanese stocks up 244.08 points, or 2.72%, to 9,206.75. If the intervention succeeds and the yen is brought under control, Japanese exporters should see their prospects and their stock prices climb even higher.

Toyota Motor Corporation (NYSE: TM), Sony Corporation (NYSE: SNE) and Hitachi, Ltd. (NYSE: HIT) are three Japanese companies that would benefit from an improved environment for Japanese exporters and each stock trades on the New York Stock Exchange, so it's easy for Americans to invest in them.

Investors who are bullish on the G7 intervention and want exposure to a broader range of Japanese stocks may want to consider the ProShares Ultra MSCI Japan (NYSE: EZJ) ETF.

For investors who think that the yen could go higher, despite the G7 intervention, the WisdomTree Dreyfus Japanese Yen (NYSE: JYF) RTF is worth a look.

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